The Economist Intelligence Unit is relaunching its industry blog. Now known as EIU Views, the site features data-driven commentary by members of the EIU’s industry team. The approach is much the same as Daily Data Point, but the new site will feature a broader pool of editors writing about a wider range of sectors (including, of course, the financial services industry).

]]>https://eiudatapoints.wordpress.com/2011/11/17/weve-moved/feed/0EIU Financial Services BriefingdetourCredit markets: Test of equivalencehttps://eiudatapoints.wordpress.com/2011/08/19/credit-markets-test-of-equivalence/
https://eiudatapoints.wordpress.com/2011/08/19/credit-markets-test-of-equivalence/#commentsFri, 19 Aug 2011 16:05:18 +0000http://eiudatapoints.wordpress.com/?p=2643]]>Yesterday, bonds issued by Walt Disney set new records for corporate debt, with the lowest-ever coupons achieved for five-, ten- and 30-year bonds. Disney’s ten-year tranche, with a coupon of 2.75%, boasted a yield roughly the same as French sovereign bonds.

As investors seek safe havens amid market turmoil, yields on US Treasuries have plunged, giving intrepid corporate borrowers in America an opportunity to pitch for low-cost, long-term funding. Coca-Cola and AT&T also issued bonds this week at record-low yields for the companies.

As Treasuries, gold, the Swiss franc and other perceived low-risk assets attract investors, this got us thinking about the creditworthiness of the world’s strongest corporate borrowers vis-à-vis beleaguered sovereigns. At the close of trading yesterday, there were 25 companies with narrower credit default swap spreads than the top-ranked sovereign, Norway. In the minds of CDS traders, Norway is roughly as creditworthy as Walt Disney (is Mickey’s Magic Kingdom now considered a safe haven?). The map below shows the approximate corporate equivalents to a selection of European sovereigns, according to the CDS market.

In a day of extraordinary action in the markets, perhaps the most noteworthy move yesterday was a 20% plunge in the share price of Bank of America. Despite rallying today, the bank, America’s largest by assets, has seen its shares lose around 30% of their value so far this month (and nearly 50% so far this year).

Bank of America now trades at a wince-inducing 32% of its book value. This puts it at the bottom of the price-to-book league table for domestic banks. But there are banks in Europe that trade at similar discounts; many of these remain part-nationalised (RBS, Dexia) or face severe sovereign-related stress (UniCredit, Alpha Bank). For Bank of America, a major mortgage lender, this is is not the best neighbourhood to be in.

]]>https://eiudatapoints.wordpress.com/2011/08/09/bank-of-america-deep-discount/feed/0EIU Financial Services BriefingPB ratios 08-09-11UK banks: A reprieve, of sortshttps://eiudatapoints.wordpress.com/2011/07/20/uk-banks-a-reprieve-of-sorts/
https://eiudatapoints.wordpress.com/2011/07/20/uk-banks-a-reprieve-of-sorts/#commentsWed, 20 Jul 2011 14:23:22 +0000http://eiudatapoints.wordpress.com/?p=2626]]>British banks received a fillip from parliament today, as the Treasury Select Committee called for “more detailed analysis” of the proposal to ring-fence banks’ retail units from the rest of their operations. Banks have criticised the proposal, made by the Independent Commission on Banking, as saddling them with unnecessary costs and restraining their capacity to lend. Signs of a rethink on the proposal sent British banks’ shares sharply higher.

The rally reversed steep declines following Friday’s EU stress test. Although all four of the British banks in the test passed, some of the details that emerged about the banks’ balance sheets spooked investors. In particular, funding costs soared in the test’s “adverse” scenario—which many analysts, including the EIU, think was not nearly adverse enough. The cost of funding for Barclays, for example, rose almost four-fold between 2010 and 2012 in the test, the largest jump in the 90-bank sample. The other British banks in the sample also saw above-average increases in costs, thanks in part to reliance on wholesale funding sources.

Exposure to fickle wholesale markets is one of the reasons cited in favour of erecting firewalls around universal banks’ retail activities. Any new analysis of the retail ring-fence idea should take the implications of banks’ enduring reliance on short-term interbank markets into account.

]]>https://eiudatapoints.wordpress.com/2011/07/20/uk-banks-a-reprieve-of-sorts/feed/0EIU Financial Services BriefingUK bank funding cost 07-20-11Euro area debt crisis: Default optionshttps://eiudatapoints.wordpress.com/2011/07/13/euro-area-debt-crisis-default-options/
https://eiudatapoints.wordpress.com/2011/07/13/euro-area-debt-crisis-default-options/#commentsWed, 13 Jul 2011 12:25:32 +0000http://eiudatapoints.wordpress.com/?p=2621]]>A new survey of executives by the Economist Intelligence Unit adds another perspective to the all-but-inevitable event roiling financial markets: a Greek default. Nearly three-quarters of more than 300 executives polled by the EIU over the past week believe that Greece will eventually default on its debt. (For the full survey results, visit the EIU’s Business Research site.)

On Monday, euro area finance ministers released a statement calling for a “broader and more forward-looking policy response” to Greece’s ongoing struggles with its crushing debt burden. On the same day, Greek prime minister George Papandreou added his thoughts on the matter, warning that “if Europe does not make the right, collective, forceful decisions now, we risk new, and possibly global, market calamities due to a contagion of doubt that will engulf our common union.”

In the EIU’s survey, a small but noteworthy minority of respondents, 12%, think that the impact of a Greek default will be of a similar scale and magnitude of the collapse of Lehman Brothers in 2008. A larger share of executives, 47%, predict a significant, long-lasting impact, but with the pain largely confined to the euro area. The remaining respondents either expect little impact or weren’t willing to hazard a guess.

With Greece’s benchmark bonds trading at half of face value, and spreads for Spain and Italy recently touching euro-era highs, officials are scrambling to stem the contagion from the monetary union’s troubled periphery. There is talk of an emergency euro summit on Friday, when release of the EU’s bank stress tests could destabilise markets further. But true to form, euro area officials are findingitdifficult to come to an agreement on whether to meet or not.

]]>https://eiudatapoints.wordpress.com/2011/07/13/euro-area-debt-crisis-default-options/feed/0EIU Financial Services BriefingFS survey 07-13-11Interbank lending: Swap meethttps://eiudatapoints.wordpress.com/2011/07/08/interbank-lending-swap-meet/
https://eiudatapoints.wordpress.com/2011/07/08/interbank-lending-swap-meet/#commentsFri, 08 Jul 2011 14:12:21 +0000http://eiudatapoints.wordpress.com/?p=2615]]>The Federal Reserve’s “temporary” dollar swap lines with other major central banks are beginning to look like anything but temporary. The facilities were first introduced in December 2007, closed in February 2010, reopened in May 2010, and recently extended through August 2012. Under these agreements, the Fed offers unlimited dollar liquidity to other central banks, which in turn offer the funds to local banks that find it difficult to borrow in interbank markets.

The “re-emergence of strains in short-term US dollar funding markets” was cited by the Fed when it revived the programme last year after its brief hiatus. The recent extension of the swap lines—previously scheduled to expire next month—suggests that officials believe that these strains remain, or may be worsening. But so far the move looks like more of a precaution than a sign of imminent distress. Since announcing the extension on June 29th, no central bank has drawn on the facility (the data is reported weekly, on Thursdays). In fact, the swap lines have not been used since March, when only US$70m was drawn, a small fraction of the hundreds of billions borrowed during the depths of the crisis following the collapse of Lehman Brothers.

]]>https://eiudatapoints.wordpress.com/2011/07/08/interbank-lending-swap-meet/feed/0EIU Financial Services BriefingFed swap lines 07-08-11IPOs in Hong Kong: Mostly sunnyhttps://eiudatapoints.wordpress.com/2011/07/06/ipos-in-hong-kong-mostly-sunny/
https://eiudatapoints.wordpress.com/2011/07/06/ipos-in-hong-kong-mostly-sunny/#commentsWed, 06 Jul 2011 22:52:12 +0000http://eiudatapoints.wordpress.com/?p=2606]]>The volume and value of initial public offerings in Hong Kong soared in the first half of the year, according to a new analysis by PricewaterhouseCoopers. Despite some companies getting cold feet and pulling planned listings in recent weeks, PwC believes the Hong Kong exchange is on track for another robust year.

Last year, the number of IPOs in Hong Kong rose by 56% and the value of funds raised increased by nearly 80%. In the first half of this year, the volume of listings rose by 55% and the value of money raised nearly tripled when compared with the same period in 2010. The number of expected IPOs in 2011—110, reckons PwC—should be roughly equal to the previous year. However, the value of fundraising, forecast at HK$380bn (US$48.8bn), is expected to fall by 15% from 2010.

Choppy markets led six firms to scrap planned Hong Kong IPOs last month, although the pipeline still looks relatively healthy. Chinese retailer Sun Art, for example, reportedly closed the books early on its HK$8bn listing. If not as lucrative as last year, the IPO market in Hong Kong still looks to be one of the busiest in the world this year.

]]>https://eiudatapoints.wordpress.com/2011/07/06/ipos-in-hong-kong-mostly-sunny/feed/0EIU Financial Services BriefingHK IPOs 07-06-11American banks: Turning Japanese?https://eiudatapoints.wordpress.com/2011/06/22/american-banks-turning-japanese/
https://eiudatapoints.wordpress.com/2011/06/22/american-banks-turning-japanese/#commentsWed, 22 Jun 2011 22:55:48 +0000http://eiudatapoints.wordpress.com/?p=2596]]>After a brief growth spurt, bank lending in the US shrank in April and May, according to the latest data from the Federal Reserve. As Bloomberg points out, banks’ appetite for government bonds has remained relatively robust since the onset of the financial crisis. American banks now hold almost US$1.7trn in treasuries and related government debt, with holdings growing by an 11-12% annual clip so far this year, despite miserly yields.

The situation at Japanese banks looks eerily similar. Funds are being recycled into government bonds instead of loans, with year-on-year credit in a seemingly permanent state of contraction. The Economist Intelligence Unit does not expect America to experience a protracted slump like the one that has dogged Japan since its spectacular asset-price bubble burst in early 1990s. Still, there are enough similarities in some metrics to cause discomfort.

Encouragingly, deposits at American and Japanese banks are at or near record highs. This will please regulators, who are urging banks to avoid flightier wholesale sources of funding. But until these funds are put to more productive use than stockpiling low-yielding government bonds, nobody will be truly happy.

]]>https://eiudatapoints.wordpress.com/2011/06/22/american-banks-turning-japanese/feed/0EIU Financial Services BriefingBank debt holdings 06-22-11Bank loans in China: Tapping the brakeshttps://eiudatapoints.wordpress.com/2011/06/14/bank-loans-in-china-tapping-the-brakes/
https://eiudatapoints.wordpress.com/2011/06/14/bank-loans-in-china-tapping-the-brakes/#commentsTue, 14 Jun 2011 14:45:22 +0000http://eiudatapoints.wordpress.com/?p=2584]]>In most large countries, loan growth of 17% would represent a breakneck pace. In China, such growth is perceived as sign of a slowdown.

In May, the value of China’s outstanding bank loans rose by 17% from the year before, the slowest pace since late 2008. A series of interest rate increases and, more importantly, hikes to banks’ reserve requirements appear to be cooling the stimulus-fuelled surge in lending recorded in the months after the global financial crisis. The latest boost to reserve requirements, announced today, is the sixth hike so far this year. More increases are likely in the coming months, as worries persist over rising consumer inflation—5.5% in May—and a frothy property market. Still, the Economist Intelligence Unit expects China’s GDP to grow by 9% this year, only a modest slowdown from the 10.3% growth recorded in 2010. Despite the central bank’s tightening measures, credit conditions will remain relatively loose.

(Note: Some data in this post, and the accompanying chart, have been updated to reflect revised historical data.)

]]>https://eiudatapoints.wordpress.com/2011/06/14/bank-loans-in-china-tapping-the-brakes/feed/1EIU Financial Services BriefingChina bank loans 06-14-11American banks: Too small to survivehttps://eiudatapoints.wordpress.com/2011/06/08/american-banks-too-small-to-survive/
https://eiudatapoints.wordpress.com/2011/06/08/american-banks-too-small-to-survive/#commentsWed, 08 Jun 2011 13:47:51 +0000http://eiudatapoints.wordpress.com/?p=2573]]>On June 3rd, Atlantic Bank and Trust of Charleston, South Carolina became the 45th bank in the US to fail this year. After a brief period in receivership under the control of the Federal Deposit Insurance Corporation, the lender’s assets—worth US$208m—were transferred to First Citizens Bank and Trust.

This is not an unusual occurrence: 367 banks have failed since 2008. But the pace of failures so far this year is slower than in 2010. And only five banks failed in May, which some see as an “encouraging milestone”. Recall, however, that three banks failed in March, promptly followed by 13 in April, the highest monthly tally since last spring.

More encouraging is that the size of failed banks so far this year is significantly smaller than last year—an average of US$430m in assets per bank through May this year, versus US$867m over the same period in 2010.

]]>https://eiudatapoints.wordpress.com/2011/06/08/american-banks-too-small-to-survive/feed/0EIU Financial Services BriefingFailed banks 06-08-11Euro area debt: Neither a borrower nor a lender behttps://eiudatapoints.wordpress.com/2011/06/06/euro-area-debt-neither-a-borrower-nor-a-lender-be/
https://eiudatapoints.wordpress.com/2011/06/06/euro-area-debt-neither-a-borrower-nor-a-lender-be/#commentsMon, 06 Jun 2011 18:44:36 +0000http://eiudatapoints.wordpress.com/?p=2559]]>Analysts are poring over new statistics on debt exposure from the Bank for International Settlements released today. As has become customary with each quarterly release of this data, the report’s (virtual) pages are flipped directly to the section detailing the size of banks’ portfolio of bonds issued by governments on the euro area’s troubled periphery.

French and German banks are the most exposed, by far, to troubled government debt. Although banks have been reducing their exposure—the value of debt from Greece, Ireland, Portugal and Spain held by foreign banks fell by 35% last year—significant holdings remain. German banks, for example, were sitting on more than 40% of the US$54bn in foreign-held Greek government debt at the end of 2010.

The inevitable restructuring of Greek debt will be painful for lenders, although the severity will vary according to the method employed. In the meantime, attempts to cajole banks into a voluntary refinancing of Greece’s daunting debt pile (along the lines of the “Vienna Initiative” in central and eastern Europe) will continue, despite a glaring lack of incentives for lenders to take part.

After reaching a (nominal) record price early this month, gold is back in the news, with prices resuming their climb after a mid-month stumble. Risk aversion tied to renewed fears over the euro area is generally cited for the recent spurt.

Taking a longer view, the Economist Intelligence Unit believes that the gold price is now at or near its peak (details can be found at our Global Forecasting Service site: free registration required). The average price is expected to peak this quarter, with an 8% slide forecast for the second half of the year. Monetary tightening and a stronger dollar should push the gold price down further in 2012—in terms of the average annual price, we expect a decline of 12% next year.

]]>https://eiudatapoints.wordpress.com/2011/05/25/gold-downhill-from-here/feed/1EIU Financial Services BriefingGold 05-25-11Mortgage fraud in America: Suspicious activityhttps://eiudatapoints.wordpress.com/2011/05/10/mortgage-fraud-in-america-suspicious-activity/
https://eiudatapoints.wordpress.com/2011/05/10/mortgage-fraud-in-america-suspicious-activity/#commentsTue, 10 May 2011 21:49:18 +0000http://eiudatapoints.wordpress.com/?p=2543]]>The number of reports of suspected mortgage fraud in America rose by 5% last year, to a record annual high, according to the Treasury Department. But a new study by the LexisNexis Mortgage Asset Research Institute, which collects its own data on mortgage fraud, claims that cases of “verified, material misrepresentation” in the mortgage origination process fell by 41% over the same period.

A stricter definition of fraud explains some of the difference with the Treasury’s figures, as does a general decline in mortgage lending, LexisNexis says. More worryingly, the company notes that “fraud has become more complex and harder to verify using traditional methods.” More than 90% of the fraud submissions received in 2010 dealt with loans written in prior years; with time, more fraud perpetrated in 2010 will likely come to light. Among the cases reported to LexisNexis last year, Florida saw three times as many submissions as its share of the national mortgage market. Fraud volume in New York and California was more than twice those states’ share of overall mortgage originations.

]]>https://eiudatapoints.wordpress.com/2011/05/10/mortgage-fraud-in-america-suspicious-activity/feed/0EIU Financial Services BriefingMortgage fraud 05-10-11Reinsurance: Dealing with disasterhttps://eiudatapoints.wordpress.com/2011/05/09/reinsurance-dealing-with-disaster/
https://eiudatapoints.wordpress.com/2011/05/09/reinsurance-dealing-with-disaster/#commentsMon, 09 May 2011 20:26:04 +0000http://eiudatapoints.wordpress.com/?p=2536]]>Munich Re, the world’s largest reinsurer by premiums, reported its latest quarterly results today, covering “the most loss-afflicted [quarter] in reinsurance history in terms of natural catastrophes,” according to chairman Nikolaus von Bomhard. The devastating earthquake and tsunami in Japan, in addition to another earthquake in New Zealand and widespread flooding in Australia, saddled Munich Re with €2.7bn in costs in the first quarter.

The impact of recent natural disasters on reinsurers is vividly illustrated by key players’ combined ratios—the ratio of losses and expenses to earned premiums. Munich Re reported a combined ratio of 159% in the first quarter, up from 96% in the previous quarter. Second-ranked reinsurer Swiss Re reported a similarly dire combined ratio of 164% in the first quarter.

Financially speaking, there is a silver lining to the recent losses: upward pressure on premium prices. Munich Re saw price increases of up to 50% on certain earthquake policies for April renewals, and predicts a “hardening effect” on a broader range of business lines during the July renewals. For its part, Swiss Re saw “strong” price increases in Japan and a “flattening” in prices in the US and Europe following decreases in January. With a series of severe tornadoes striking the US South and Midwest in April, and the Atlantic hurricane season approaching, further catastrophe losses could bring about a decisive turn in the pricing cycle sooner rather than later.

]]>https://eiudatapoints.wordpress.com/2011/05/09/reinsurance-dealing-with-disaster/feed/0EIU Financial Services BriefingMunich Re 05-09-11Article of the week: Cooling Israel’s mortgage markethttps://eiudatapoints.wordpress.com/2011/05/06/article-of-the-week-cooling-israels-mortgage-market/
https://eiudatapoints.wordpress.com/2011/05/06/article-of-the-week-cooling-israels-mortgage-market/#commentsFri, 06 May 2011 21:02:00 +0000http://eiudatapoints.wordpress.com/?p=2531]]>The majority of data and analysis at Financial Services Briefing is available only to subscribers. Each week, a small share of content from the service is made available to non-subscribers.

A series of tough measures, accompanied by equally tough talk, have made it clear that Bank of Israel governor Stanley Fischer is determined to prevent a crisis in Israel’s property market.

Israel’s latest directive imposing restrictions on the mortgage market was issued by its newly-appointed banking sector regulator, David Zaken, on April 28th and took effect on May 5th. It restricts the share of mortgages with adjustable rates that change at least once every five years to one-third of total lending. This restriction applies to all forms of financing in use in Israel, namely shekel floating-rate mortgages, loans linked to the consumer price index and loans linked to exchange rates (generally the shekel versus the dollar). According to the latest central bank data, these three channels comprise 48%, 32% and 6%, respectively, of total mortgage borrowing.

Although the institution is reluctant to label current conditions in the region’s largest markets bubbly, when it comes to credit growth the IMF acknowledges that concerns are rising about whether loan growth is becoming “excessive and eventually unsustainable.” Equity prices are also showing signs of “stretched valuations” in places like Chile, Colombia and Peru.

Despite being one of the region’s most active users of “macroprudential” measures to cool its economy, Peru stands out from the pack due to its rapid recent credit growth and, especially, sky-high equity valuations.

]]>https://eiudatapoints.wordpress.com/2011/05/04/latin-american-markets-too-hot-to-handle/feed/0EIU Financial Services BriefingLatAm markets 05-04-11Stock indexes: Mix and matchhttps://eiudatapoints.wordpress.com/2011/05/03/stock-indexes-mix-and-match/
https://eiudatapoints.wordpress.com/2011/05/03/stock-indexes-mix-and-match/#commentsTue, 03 May 2011 22:20:45 +0000http://eiudatapoints.wordpress.com/?p=2514]]>Today, Standard & Poor’s announced a new equity index based on the CIVETS countries. The moniker, coined by the Economist Intelligence Unit a few years ago, describes a group of sizeable emerging markets—Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa—with appealing conditions for sustained high growth. Although not yet part of common parlance like the BRICs (Brazil, Russia, India and China), the CIVETS are generally the most-discussed markets in the next tier of emerging economies.

For its part, S&P describes the group as characterised by “dynamic, rapidly changing economies and young, growing populations.” Back-testing its new index, the CIVETS-based construction has recently outperformed indexes based on the BRICs as well as emerging markets in general. But this is not to say that shares in the CIVETS countries are uniformly buoyant: since the start of 2008, Colombian large caps have risen by more than 60% while large Egyptian stocks have shed more than 50% of their value. The group is an eclectic mix of political and economic systems, with financial markets of widely varying maturities. Thus, an index built from the CIVETS offers exposure to a targeted yet diversified basket of important emerging economies.

The recent performance of CIVETS shares will attract adventurous investors seeking outsized returns, much like intrepid coffee lovers who covet a rare, expensive type of bean harvested with the help of the civet, a cat-like mammal. In a less auspicious omen, civets were also linked to the spread of the deadly SARS virus.

]]>https://eiudatapoints.wordpress.com/2011/05/03/stock-indexes-mix-and-match/feed/0EIU Financial Services BriefingCIVETS index 05-03-11Article of the week: The future of banking in Britainhttps://eiudatapoints.wordpress.com/2011/04/22/article-of-the-week-the-future-of-banking-in-britain/
https://eiudatapoints.wordpress.com/2011/04/22/article-of-the-week-the-future-of-banking-in-britain/#commentsFri, 22 Apr 2011 13:17:43 +0000http://eiudatapoints.wordpress.com/?p=2506]]>The majority of data and analysis at Financial Services Briefing is available only to subscribers. Each week, a small share of content from the service is made available to non-subscribers.

“Straightforward to characterise, but difficult to quantify”. The Independent Commission on Banking (ICB), a group assembled by the British government to make recommendations on regulatory reforms, delivered its interim report on April 11th. “Everyone agrees that we need a much more robust banking system than that of the past decade”, said Sir John Vickers, the ICB’s chairman.

A week after the report’s publication, markets continue to mull the implications of the report, as well as the prospects for British banking in general. Tellingly, the initial rally in many banks’ shares immediately following the release of the report quickly fizzled, with all of the major banks now trading below the levels seen on the eve of the report’s publication

It appears that the UK’s approach to restructuring its banking system will rely on higher capital requirements for retail units and an attempt to engineer a viable “challenger” to the biggest banks from the portfolio of Lloyds Banking Group. Other countries with significant financial centres, like Switzerland, have already gone further on capital requirements while others, like the US, have been stricter on limiting the market share of major players.

It may take years to judge whether regulators can promote a more stable and competitive banking market in the UK. In the meantime, markets have shorter-term concerns.

]]>https://eiudatapoints.wordpress.com/2011/04/22/article-of-the-week-the-future-of-banking-in-britain/feed/0EIU Financial Services BriefingUK bank shares 04-22-11Banks in America: Growing painshttps://eiudatapoints.wordpress.com/2011/04/20/banks-in-america-growing-pains/
https://eiudatapoints.wordpress.com/2011/04/20/banks-in-america-growing-pains/#commentsWed, 20 Apr 2011 22:55:52 +0000http://eiudatapoints.wordpress.com/?p=2497]]>Today, Wells Fargo reported record quarterly earnings of US$3.8bn, up nearly 50% on the same quarter last year. JPMorgan kicked off the reporting season last week with quarterly net profit growth of 67%. The country’s other banking giants—Bank of America, Citigroup and Goldman Sachs—shared less encouraging news, with first-quarter profits down on last year.

What all of these banks have in common, however, is falling revenues. From racy investment banks to retail-focused lenders, America’s largest banks are still shrinking. Releasing provisions and cutting costs can only go so far; a true recovery will begin when top lines start to grow again.

]]>https://eiudatapoints.wordpress.com/2011/04/20/banks-in-america-growing-pains/feed/0EIU Financial Services BriefingUSA banks Q1 04-21-11Article of the week: Turkey’s new central bank governorhttps://eiudatapoints.wordpress.com/2011/04/15/article-of-the-week-turkeys-new-central-bank-governor/
https://eiudatapoints.wordpress.com/2011/04/15/article-of-the-week-turkeys-new-central-bank-governor/#commentsFri, 15 Apr 2011 15:28:21 +0000http://eiudatapoints.wordpress.com/?p=2490]]>The majority of data and analysis at Financial Services Briefing is available only to subscribers. Each week, a small share of content from the service is made available to non-subscribers.

These are tense times for Turkish bankers. The five-year term of Durmus Yilmaz, the country’s central bank governor, ends on April 18th. His successor, announced on April 14th, is Erdem Basci, a long-standing deputy governor. The change at the top comes as the risks to Turkey’s economic and financial stability are rising, not least due to a ballooning current account deficit fuelled by a credit-driven surge in domestic demand.

The appointment of Mr Basci ensures continuity at the central bank, but since he is seen as close to deputy prime minister Ali Babacan worries are surfacing about the extent of the central bank’s independence from the government. The unorthodox two-pillar approach adopted by Turkey’s central bank since December has combined steady increases in banks’ reserve requirements at the same time as reductions in short-term interest rates. Although government ministers have commended these policies, Turkey’s bankers complain that recent measures unduly punish the industry.